Tuesday, January 19, 2010

Innergex Power Income Fund 2

I want to continue my review today of Innergex Power Income Fund (TSX-IEF.UN). This is a stock I held for a short period of time from 2006 to 2008. I bought this stock in 2006 as it was highly rated and it was in the alternative energy field. I sold in 2008, as dividend increase was very low.

When I look at the Insider Buying and Insider Selling on this stock, I find one lone buy costing some $18,000 for the CFO of the company in March of 2009. A company called Innergex Renewable Energy Inc. operates this company and owes almost 5% of the shares.

There is only 5 years of data on this company, so this is not much. The 5 year average P/E low is 25 and the 5 year average high is 30. The average low is a high P/E. The current P/E I calculate to be 14 and this is probably not a bad one, but a little high. For sites using the last 12 months of earnings, they get a P/E of close to 60 and this is, of course, very high, but earnings have been low lately. When I look at the Price/Book Value ratio, the current ratio is above the 5 year average. This is not surprising as the Book Value is decreasing.

Looking at the dividend yield, the current yield is 9.5%, this is above the 5 year average of 7.9%, and so this says the stock price is relatively good. The other thing is the Graham Price. This price is $10.30 compared to a stock price of $10.46. This says the stock price is also relatively good.

When I look at what the analysts recommend, what I find is Buy and Hold recommendations. The consensus is probably a Hold. (See my site for information on analyst ratings.) Those with a Buy recommendation feel that this is a conservative investment and an investor can gain with the distributions with little downward pressure on the stock price.

I am going to continue to track this stock for awhile, but I think the negatives for it is the declining Book Value and the fact that management has not be very explicit on what they are going to do in 2011. This is when most trusts will convert to corporations, as they will be tax as corporations. The only thing I see is that the management has said they the tax changes will adversely affect the distributions. They give no idea of how adverse the affect will be. So, I find it hard to judge if this is a good investment or not.

Innergex Power Income Fund acquires and operates a portfolio of hydroelectric facilities and wind farms in North America that produce electricity exclusively from renewable energy sources. Its web site is www.innergex.com. See my spreadsheet at www.spbrunner.com/stocks/ief.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website at www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets. Also, look at other investing notes on my website at www.spbrunner.com/investing.html.

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